Top banks impeded a federal inquiry into their foreclosure processes, according to a report released Tuesday, dragging their feet on turning over documents and blocking investigators' attempts to interview bank employees.

The inquiry led to the wide-ranging $25 billion mortgage settlement with the five largest mortgage servicers that was announced last month and filed in federal court on Monday.

But the banks hampered an early investigation into whether they were pursuing unlawful foreclosures through shoddy paperwork and lax controls, the inspector general's office at the U.S. Department of Housing and Urban Development said in its report.

Bank of America , for example, provided only excerpts of files, incomplete documents, and conflicting information to government investigators, and refused to provide some of its foreclosure policies.

It also limited employee interviews, and refused to let employees answer certain questions, the report said.

In the Bank of America investigation, the HUD watchdog said it had to enlist the Justice Department's help to issued civil subpoenas in order to secure documents and obtain testimony.

Bank of America spokesman Dan Frahm disputed HUD's report.

"Bank of America fully cooperated with the HUD Office of the Inspector General's review of mortgage servicing practices and any suggestion otherwise is both inaccurate and inconsistent with how we work with all regulators," Frahm said in a statement.

The investigation into the banks was sparked by reports in 2010 that they had used "robosigners" to unlawfully sign foreclosure documents without reviewing their accuracy.

After nearly one and one-half years of negotiations, the five banks - Bank of America, JPMorgan Chase ,Wells Fargo , Citigroup , and Ally Financial - agreed to pay around $5 billion cash and provide around $20 billion in relief to distressed homeowners in order to resolve the allegations.

But in conducting the investigation, the HUD watchdog had problems similar to homeowners who have complained that the banks have been hard to reach, uncooperative and disorganized during loan modifications and attempts to avoid foreclosure.

JPMorgan Chase, for example, did not provide certain records, other records were incomplete, and it did not provide a point-of-contact to explain or clarify the data, the report said.

A spokesman for JPMorgan declined to comment on the report.

Wells Fargo too did not allow the inspector general to interview some employees and the lender did not provide information in a "timely manner," it said.

The bank provided a list of 14 affidavit signers and notaries, but initially only allowed 5 of the 14 to be interviewed, it said.

Wells Fargo was reluctant, but agreed in the end to interviews with the rest, though the "delays may have limited the effectiveness of those interviews," the report found.

In response, Wells Fargo said the matters raised in the report cover observations that are two-four years old and they have been addressed. "Wells Fargo has made significant strides with implementing a number of changes in line with industry and regulatory servicing standards."

Citigroup's mortgage unit, meanwhile, did not have a mechanism for tracking how many foreclosure documents it signed, or which documents were signed by each individual, the report said.

The lack of records "significantly hindered" the review, it said.

In a statement, Citi said since 2009 it has improved its foreclosure process by consolidating operations into one central unit, "significantly reinforcing" the size and training of its staff, and tightening control processes.

LITTLE QUALITY CONTROL

The investigations themselves focused on whether the banks had weak internal controls, and whether signatories on foreclosure documents had actually reviewed the facts contained in the documents.

The reports found that in many cases, they had not.

Bank of America, for example, "had no effective quality assurance function," the report said.

The primary focus of quality control employees was to ensure that name and title stamps on foreclosure documents were legible, the report said.

One notary said the daily volume of documents had increased from 60, to 200, to 20,000.

Citi did not have written policies and procedures for the signing process before 2009 and did not have a mechanism for tracking foreclosure documents, the report said.

Wells Fargo hired employees with little experience to sign some of its foreclosure documents.

One person hired as vice president of loan documentation had worked at a pizza restaurant and as a bank teller before that, the report said. Another had been a department store cashier and daycare worker, while another had worked on the production line in a factory.

Some of the employees told investigators that Wells did not provide them training when they began signing affidavits.

SOURCE Reuters